PDVSA Bonds Gain to Two-Year High as Traders See Desire to Payby and
Debt bounces back after drop on Monday following swap offer
PDVSA to offer new bonds at 1:1 ratio to old until Sept. 29
Petroleos de Venezuela SA’s debt reached a two-year high as investor conviction that the country wants to pay its obligations overcame initial disappointment over the company’s $7 billion bond-swap offer.
The $4.1 billion of notes due November 2017 from Venezuela’s state-owned oil company gained 1.93 cent to 80.32 cents on the dollar as of 12:44 p.m. in New York, rallying for a second day and reaching the highest since September 2014. The bonds dropped the most in six weeks Monday as investors were disappointed that the offer to exchange new notes for debt coming due next year didn’t include a premium on the securities’ face value and instead offered a lien on PDVSA’s U.S. refining arm as collateral.
The bonds bounced back as analysts cited the positive aspects of the swap, saying it signaled that Venezuela was still keen to avoid default. While the collateral from refining unit Citgo has been hard to value, it may be attractive to some investors, according to Asdrubal Oliveros, a director at the Caracas-based consulting firm Ecoanalitica.
“Even though the financial conditions of the swap aren’t the most attractive for a deal of this kind, in Venezuela’s case there are some particularities to take into account,” Oliveros said. “There are a lot of local funds concentrated on Venezuelan debt, the majority of which are operated by Venezuelans and their partners, who have a high appetite for the risk and returns that Venezuela and PDVSA offer.”
There was also speculation that the terms could be improved to draw bigger participation.
“The more recent reaction may be associated with expectations that the terms of the exchange could be modified and made more attractive for bondholders, for instance, increasing the exchange ratio,” said Fernando Losada, an economist at AllianceBernstein.